Miners bear brunt of risk aversion as investors take fright

Hanwa

05/12/2018 11:14

* New listings and fund flows fall
    * Miners say battery minerals, copper still have potential
    * Sustainability, regulation issues a factor

    By Clara Denina  and Barbara Lewis
    LONDON/KATOWICE, Poland, Dec 5 (Reuters) - A two-year
recovery in the mining industry has faltered, as trade tensions
between China and the United States and concerns about economic
growth weaken commodity prices and deter investment. 
    Institutional investors and fund managers say tighter
regulations, namely MiFID, a major reform of European Union
financial markets, have limited banks' lending to mining
companies and reduced research coverage, giving them fewer tools
to carry out due diligence on businesses.
    Sustainability and anxiety about the impact of mining on
global warming has also risen to the top of the agenda, pushing
miners to find new resources in riskier and politically unstable
jurisdictions. 
    "An increasing number of investors are becoming aware that
ESG (environment, social, governance) risks can also be
financially relevant," Matthew Smith, head of sustainable
investments at Storebrand Asset Management, said.
    The total amount raised in debt, equity and depository
receipts for the mining sector globally in the first nine months
of the year fell 60 percent to $18.8 billion, compared to $44.9
billion in the same period a year ago, S&P Global Market
Intelligence data shows. 
    At the same time, the number of new London listings has
fallen again after a tentative recovery in 2017, with the amount
of money raised by junior miners so far this year down more than
40 percent from 2018, figures from the London Stock Exchange
show.
    With an 11 percent fall this year so far, mining
 .FTNMX1770  has been the third worst performing sector in
London after banking and the automobile industry.
    Junior miners are worst affected, but major mining companies
 also say they are undervalued and are striving to improve their
image through partnerships and promises to tackle
sustainability.  urn:newsml:reuters.com:*:nL8N1XQ7DV
    Fund activity is also shrinking, according to financial data
provider Preqin, which said 17 metals and mining funds are
seeking to raise $4.6 billion in capital, compared to $7.9
billion in January.
    Mining companies say it has been a bad year, but the best
projects can still find financing and they see potential in
battery minerals.
    A global battery boom, driven by growing demand for electric
cars and renewable power, is expected to stoke demand for metals
such as nickel, cobalt and manganese and encouraging miners to
accelerate development plans.
    Another metal seen as a good bet is copper because of its
role in electrification as grids are transformed to cope with
renewable energy.
    "There's money around for the right story," CEO Peter Secker
of Bacanora  BCNC.L , a lithium company, said. 
    Prices of lithium, also used for rechargeable batteries,
have been very volatile, but analysts say consumption will grow
as there is no obvious substitute.
    At climate talks in Poland, taking place to agree how the
terms of a global transition from fossil fuel, on Tuesday,
Poland and Britain made a joint declaration to promote electric
vehicles.  urn:newsml:reuters.com:*:nL8N1Y90I5
    Bacanora cancelled a share sale in July because of volatile
market conditions, but Secker said it has hired Citibank to
explore future options for the new year. urn:newsml:reuters.com:*:nFWN1UC0IB    
    

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Investments into mining     https://tmsnrt.rs/2QdYYn8
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 (Reporting by Barbara Lewis and Clara Denina; additional
reporting by Zandi Shabalala; Editing by Elaine Hardcastle)
 ((Barbara.hm.Lewis@thomsonreuters.com; +44 207 542 2932;
Reuters Messaging:
barbara.hm.lewis.thomsonreuters.com@reuters.net))